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Loan Commitment Contracts, Terms of Lending, and Credit Allocation
Author(s) -
MELNIK ARIE,
PLAUT STEVEN
Publication year - 1986
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1986.tb05046.x
Subject(s) - loan , business , component (thermodynamics) , set (abstract data type) , monetary economics , empirical evidence , bridge loan , non conforming loan , finance , economics , financial system , non performing loan , computer science , programming language , philosophy , physics , epistemology , thermodynamics
This paper analyzes the structure of loan commitment contracts and the interrelationships among their component parameters. Lenders offer borrowers a set of loan “packages,” from which the latter may choose that “package” found to be most appealing. Borrowers may “trade off” changes in any loan parameter in exchange for other adjustments. The borrower, at this time, may “purchase” a larger credit ration for a price. Supporting empirical evidence is presented.